2020 (9) TMI 98 - NAPA - GST

Profiteering - purchase of flat - allegation that the benefit ITC not passed to be buyers - contravention of section 171 of CGST Act - penalty - HELD THAT - It has been revealed that the Respondent has not passed on the benefit of ITC to his buyers w.e.f. 01.07.2017 to 30 09.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT - Since no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 30.09.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 26.11.2019 issued to the Respondent for imposition of penalty under Section 171 (3A) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

Summary

Issues:
1. Failure to pass on input tax credit benefits to buyers.
2. Violation of Section 171(1) of the CGST Act, 2017.
3. Imposition of penalty under Section 171(3A) of the CGST Act, 2017.

Analysis:
1. The case involved a complaint by multiple applicants regarding the respondent's failure to pass on the benefit of input tax credit (ITC) to buyers who purchased flats in a specific project post-GST implementation. The Director General of Anti-Profiteering (DGAP) conducted an investigation and found that the respondent did not pass on the ITC benefits amounting to a specific sum during a certain period. This led to allegations of profiteering and violation of Section 171(1) of the CGST Act, 2017.

2. After considering the DGAP's report, the Anti-Profiteering Authority issued a notice to the respondent to explain why the report should not be accepted and why liability for violating Section 171(1) should not be imposed. Subsequently, the Authority determined the profiteered amount and held the respondent in violation of Section 171(1) along with an offense under Section 171(3A) for denying ITC benefits to buyers and compelling them to pay more. A penalty was proposed under Section 171(3A) based on these findings.

3. The respondent contested the penalty imposition citing the prospective nature of the penalty provisions introduced through the Finance Act, 2019, effective from January 1, 2020. The Authority, upon review, noted that the penalty provisions were not in force during the period of violation (July 2017 to September 2018). As a result, the Authority withdrew the penalty notice and dropped the penalty proceedings against the respondent, emphasizing that retrospective imposition of penalties was not permissible. The order was to be supplied to both parties, and the file was to be closed upon completion of the process.